• Commercialisation of microfinance

Commercialisation of microfinance

This paper is based on the premise that mobile phones can offer a communications channel for initiating and executing on-line financial transactions. This channel may not only reduce the cost of financial transactions for provider and customer, but also allow new entrants to the financial sector, and new relationships to be formed for distributing services.

This report investigates the extent to which the expansion of mobile telephony is likely to lead to the expansion of access to appropriate financial services in developing countries, especially Africa. In particular, it seeks to answer two main questions:

• which models of mobile banking are emerging globally, and especially in Africa, and are they likely to be accelerate access?
• will it happen spontaneously or is enablement required for this to happen? If so, what forms of enablement?

To answer these questions, the report investigates emerging models and trajectories of development in m-payments and m-banking through interviews with emerging African providers and the use of secondary material. It assesses the policy and regulatory elements of an enabling environment for this sector based in part on the analysis of circumstances in two pilot African countries (Kenya and South Africa).

The paper looks at some of the following areas:

• the enabling environment for mobile banking
• emerging models and developments in m-payments and banking
• emerging experiences of m-payments
• regulatory and policy issues
• enabling principles for m-banking,

The paper finds that:

• m-banking has been slower to develop than expected. However, the volume of users is now reaching critical mass in parts of Asia, like Japan and Korea. The Philippines offers the most striking demonstration of the potential take up in a developing country. In Africa, m-banking is now being added on to the services offered to existing customers by a number of retail banks and this is likely to continue
• however, genuinely transformational models of m-banking are few today; and they face numerous obstacles, such as uncertainties about the pace and scale of customer adoption, and the fact that in some countries the policy regime may not be sufficiently open to allow a range of models to startup and develop/

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